The case of diversity in board rooms

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Diversity in boardrooms a necessity

According to a Deloitte report on women’s representation on the boards, Norway scores the highest and Qatar the least.

The business world has witnessed big changes in the last few years. Artificial intelligence (AI) has disrupted people business and left its mark on employee engagement, talent acquisition and benefits. But has it contributed enough to improve the diversity ratio on the ‘board’, is the big question.

A recent study (2019), by the Deloitte Global Centre for Corporate Governance, published the sixth edition of Women in the Boardroom, a report that brings to light the countries that have made great progress in terms of improving the percentage of women on the boards, and others that are far from doing so.

Since the leadership of any organisation influences the organisational culture, having a diverse board also ensures that the organisation attracts a diverse mix of employees

There is an overall global awareness, that having a gender-diverse boardroom has a long- lasting positive effect on business. A strong representation of women on the board has a trickle-down effect in breaking stereotype. Moreover, every society needs to encourage its women to take on leadership roles in business, so that they can be role models and mentors for other women and girls, as well as men.

In some countries, such as Germany, South Africa, Finland and Malaysia, the number of women representatives on the boards have gone up by six per cent. However, in many other countries, the progress is very slow. It is concerning that in some nations, where the change is very slow – less than one per cent— it will take up to 30 years before women representation reaches a desirable figure.

In the Indian context, the listed companies and public limited companies under the Companies Act 2013, are required to appoint at least one woman on the board, if not more. The guidelines also suggest that posts that have become vacant and that were held by women in the past are required to be filled by other women within three months or by the company’s next board meeting, whichever is later.

The Security and Exchange Board of India recently introduced a provision to improve diversity, whereby all 500 listed companies must have at least one independent director on the board by April, 2019. The remaining top 1000 listed companies have until April 2020 to comply.

In terms of numbers, 13.8 per cent women hold positions on the board in the Indian scenario. The report is based on the numbers derived from the analysis of 245 companies. Technology, media and telecommunications are the top sectors, with a higher women representation (16 per cent) followed by healthcare and life sciences (15.8 per cent). Manufacturing (13.5 per cent) and financial services (13.2 per cent) are industries with the least representation.

The study also revealed a rise in the number of CEOs from 3.4 per cent in 2016, to 6.6 per cent in 2019. The new study shows that the women CFOs form a very modest 2.5 per cent.

Change makers have become more serious than ever before in encouraging women representation on the boards and also in CEO and CFO roles. Apparently, statistics show that the larger companies, such as the multinationals, have made better progress than the smaller ones. The shareholders, who were totally profit motivated in the past are significantly paying more attention to issues, such as diversity and inclusion beyond mere gender diversity.

Since the leadership of any organisation influences the organisational culture, having a diverse board also ensures that the organisation attracts a diverse mix of employees (colour, caste, race, creed). Without a visionary board, the nominating committee will continue to bring in people like them. As a result, there will be people with similar views and mindsets.

The arguments supporting a diverse board are many. Inclusive representation raises and considers a wider set of issues and responses. It means, more energy and fresh viewpoints. A diverse board will have a more comprehensive approach towards designing organisational strategies, governance, culture, innovations and management.

Regulations and quota legislations have played a significant role in some countries to enhance a culture shift towards gender diversity and inclusivity.

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